YRC reaches agreement to reduce debt by $300 million
Under the agreement, the investors will invest $250 million in cash for newly-issued shares of common stock of YRC Worldwide at a price of $15 per share. (Courtesy: YRC Worldwide)
The Trucker News Services
OVERLAND PARK, Kan. — YRC Worldwide said Monday that it had reached an agreement with certain holders of its Series A Convertible Notes, Series B Convertible Notes and other institutional investors that will allow the carrier to reduce debt by approximately $300 million.
In doing so, the company will meet a primary requirement (retiring at least 90 percent of the company's Series A and B Convertible Notes) needed to satisfy the International Brotherhood of Teamsters' (IBT) conditionality of ratifying the Memorandum of Understanding (MOU) proposal that is currently out for ratification by the company's employees who are IBT members.
However, the agreement will still remain contingent on getting the MOU proposal ratified by its members.
The vote on the MOU is anticipated to be complete on Jan. 8, 2014, and results will be available shortly thereafter. In addition, the debt reduction deal is contingent on getting holders of at least 90 percent of the $124 million of the company's pension fund debt to amend and extend the currently outstanding note.
"The agreement is a momentous step toward delevering the company's balance sheet, significantly improving the company's credit profile, and is expected to secure some of the best paying jobs in the LTL industry," said James Welch, chief executive officer of YRC Worldwide and president of YRC Freight. "The last two years have been a long and hard fought journey in turning around one of the largest trucking companies in America. After shedding a significant portion of our non-core assets and operations and with the help of our unionized and non-unionized employees, we have focused our attention back to what we do best — North American LTL trucking."
Under the agreement, the investors will invest $250 million in cash for newly-issued shares of common stock of YRC Worldwide at a price of $15 per share. The proceeds will be used to pay off the existing 6 percent Convertible Notes due February 2014 and defease and/or pay off the existing Series A Convertible Notes due March 2015.
In addition, holders of approximately $50 million principal amount of the existing Series B Convertible Notes due March 2015 will convert those notes to common stock at a price of $15.00 to $16.01 per share, further reducing debt. The Series B Note holders that participate in the proposed transaction will also consent to amend the indenture to remove substantially all covenants and release the collateral securing those notes. The remaining Series B Convertible Notes may continue to be outstanding until their scheduled maturity of March 31, 2015. Consummation of the agreement is subject to a number of other customary conditions as well.
"These transactions will result in a substantial reduction of our debt and will position the company to address impending maturities, including the 6 percent Convertible Notes due in February 2014," said Jamie Pierson, YRC Worldwide chief financial officer. "These transactions also clear the way for us to enter the senior debt markets to refinance our current term and asset- based loans at more favorable interest rates."
"We must now focus on the upcoming ratification vote and amendment and extension of the pension note as the two final steps in completing this major debt reduction transaction and reestablishing YRCW as a leader in the LTL industry. With a positive ratification vote and an amended and extended pension fund note, the improved financial picture will allow the company to increase its investment in new tractors, trailers, technology and equally if not more importantly training and developing its people. Alternatively, if we are not successful, it would unfortunately mean some very difficult decisions for the company and its employees," Welch said.
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